When you finance anything, you finance everything.

Until you’re completely debt free, everything you purchase is financed at the rate of your highest-interest debt.

What an awful (and important) thing to realize.

After Tuesday’s post about the concept of “afford” being useless, Kate and I were discussing our desire for garage gym equipment. I asked her how she felt about the fact that paying cash for the equipment while we have debt at 10% interest is the same as swiping a 10% credit card and carrying the balance.

“That’s not right,” she said. “It’s not the same thing. We’d never put it on a credit card.”

“Right, but that’s exactly what we’re doing by buying it before our debt is paid off.”

“Well, that’s not true for essentials like groceries. It’s not like we can go without food.”

“Yes,” I told her, “it is true for groceries. Whether the purchase is essential or not is irrelevant. When you spend a dollar on something other than reducing the debt, you’ve financed that dollar. Every penny we spend is financed at our highest interest rate.”

“So, what now? You’re saying we can’t buy gym equipment until the debt is all paid off?”

“I’m just fully accepting the idea that we’d be incurring new debt by choosing not to pay down the old debt.”

“Well, we have to live. Where’s the balance?”

Where’s the balance, indeed.

The “balance”, it turns out, was wrecked when we decided to spend money we didn’t have. How interesting that we and other debtors are so comfortable getting out of balance by swiping the card or signing for the new car, but feel entitled to a “balanced” approach in how we repay the debt. We humans are funny that way.

Where does this realization leave me? I now have to consider a new, interesting, uncomfortable question every time I go to buy something:

Would I make the purchase on a credit card and carry the balance?

(Reminds me of a conversation I overheard at the gym a few weeks back. Actually I only heard one sentence:

“Yeah, we’ve decided it’s worth it to us to go ahead and put it on the credit card and pay it off over time.”

Maybe he was talking about a kidney transplant, but I don’t think so. I wanted to back-hand the guy, grip him by both shoulders and scream “Don’t do it man! Debt wrecks everything!” Maybe, after wiping the bits of spittle off his face, he’d have come to his senses. Or maybe he’d have throat-punched me.)

Anyway, back to our new, interesting, uncomfortable question. I’ll tell you what – it’s a game changer.

Would I put groceries on a credit card and carry the balance? If I had to, yes. But I’d probably have to give up my pre-cooked bacon from Costco. (Now I’m really in a terrible mood.)

I guess I’m finally realizing why people like Dave Ramsey and Mr. Money Mustache – however much those two don’t have in common – advise us to run from debt like a gazelle from a lion, and to treat it like a swarm of killer bees covering our entire bodies. It’s because, while we have debt, it casts a shadow over every purchase we make – or wish we could make. Especially that most important of all purchases: saving for the future.

The scripture tells us not to run faster than we have strength. That seems like wise advice. It doesn’t, however, tell us to avoid running. And it really doesn’t tell us to go backwards.

Your Next Step

Remember, budgeting is not restrictive. You won’t be spending less, you’ll be spending right. You can do this! Today. Right now. What do you have to lose? Except all that debt and stress. (Ok, so kind of a lot.)